Mike Zigmont, author of the Zigmont Report, is a partner at New York-based Harvest Volatility Management, a hedge fund with over $10B AUM, offering volatility management solutions to its investor base worldwide. Mike has been publishing his daily newsletter (Monday-Friday) privately for the firm’s investors and his personal contacts in the investment business since 2008, sending it daily shortly after the market close.
The opinions expressed below are my own
Rorschach market. Equities fell modestly in China and Europe and our market opened flat but quickly dropped after the bell. The bulk of the day’s softness can be attributed to a Supreme Court ruling regarding the right of States to require online businesses to collect sales taxes. I don’t know enough about the details here to navigate these waters but the market dropped noticeably on the news, taking internet retailers down. Amazon is the big boy of that bunch and so the rest of the market softened in sympathy.
Whether the sales tax issue is significant for sales and earnings, is debatable. When it comes to the overall market, we’re down about 1% from last week. It’s not a big move and it would be tough to assign a definitive cause to the move but….
The bears are trying to spin this as an inflection point and the bulls are calling it another opportunistic dip.
You see what you want to see.
Here’s the lay of the land.
- US GDP is looking good, Q2 estimate from Atlanta Fed is 4.7%
- The Fed is hiking and is leaning toward the hawkish side of things
- US equity valuations are high and growth expectations are high for the next few years
- Bulls have all the medium/long-term charts in their favor
- US stocks *appear* to be the only game in town, if you’re pursuing larger potential returns
These conditions haven’t changed and it’s unlikely that they will change in the short term. Until something major actually happens we’re probably stuck. The bulls have a slight advantage though.
I don’t think the bulls have a strong fundamental argument but that’s not what matters. The bullish mindset is the dominant mindset in the market and it won’t change due to random noise. I don’t think it can drive the tape much higher either because there needs to be a new level of enthusiasm to push us up as significant amount.
I think we’re still in a modest range and we’re not trending until we get a big bit of news/data.
See you tomorrow,